Crisis Report: Icelandic Ministers Were Negligent

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Crisis Report: Icelandic Ministers Were Negligent

The long-awaited report on the banking collapse was presented by the Althingi Special Investigation Commission (SIC) today at 10:30 am. The SIC concluded that former Prime Minister Geir H. Haarde, Finance Minister Árni M. Mathiesen and Minister of Business Affairs Björgvin G. Sigurdsson were negligent.

The SIC presents its findings. Photo by Geir Ólafsson.

The authors of the report argued that the Icelandic government had ignored warning signals and not taken the actions necessary to fight the upcoming economic disaster, ruv.is reports.

“Based on incidents and viewpoints which are explained in further detail in the relevant chapters of the report, the SIC believes [the aforementioned ministers] demonstrated negligence in the understanding of the 1. paragraph of the 1. article in the legislation no. 142/2008 in the events leading up to the collapse of the Icelandic banks by not reacting properly to the imminent danger to the Icelandic economy caused by the worsening situation of the banks,” the report’s conclusion reads.

The SIC also concluded that the government’s actions in banking affairs at the beginning of 2008 were “unsystematic” and that ministers had focused too intently on the image problems of financial companies instead of the obvious problem that the Icelandic banking system was far too large in comparison to the economy as a whole.

When ministers attempted to improve the image of the Icelandic banking system with participation in public discussions, especially abroad, they did so without estimating the financial strength of the Icelandic state and its capability to assist the banks and without having information on the cost of a potential economic collapse.

The report says actions should have been taken much sooner. “When the banking system had become too large compared to the size of the Icelandic economy, the government should have reacted. Actions should have been taken no later than 2006 for there to have been a possibility of preventing the collapse of the banks without compromising the value of their assets.”

Neither in 2006 nor in 2007 did the government try to have the banks lower their balance sheets or encourage one or more of the three largest banks to relocate their headquarters to a foreign country.

On the contrary, the Independence Party-Social Democrat coalition which took the helm on May 23, 2007, wanted to ensure with their coalition agreement that financial operations could continue to grow in Iceland and extend into other fields in competition with other market areas. It was also the government’s policy to make sure that “outvasion” companies continued to have their headquarters in Iceland.

Stay tuned for further news of the report.

For those keen on listening to a reading of the report, it is currently being read in its entirety at the Reykjavík City Theater.

Click here for further information about the reading and here to read part of the report in English.